In a court battle between the IRS and a group of Quakers, a federal judge has ruled that the Quakers must comply with a levy on the wages of a Quaker employee and "war tax protester" and that its refusal to honor the levy makes the Quakers directly liable for all of the employee's unpaid taxes.

But in a significant victory for the Quakers, U.S. District Judge Stewart Dalzell ruled that the Internal Revenue Service is not entitled to a 50 percent penalty because the church had "raised novel and important questions" about its rights under the Religious Freedom Restoration Act.

In his opinion in United States v. Philadelphia Yearly Meeting of the Religious Society of Friends, Dalzell said he agreed with the Quakers' argument that complying with the levy "substantially burdens its exercise of religion."

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